Bloomberg Could Benefit from Climate Rules He Helped Craft

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Billionaire businessman Mike Bloomberg, the former New York mayor and presidential candidate, is poised to benefit financially from proposed rules requiring climate disclosures for businesses that he had a hand in crafting, policy analysts say.

President Joe Biden’s Securities and Exchange Commission proposes that publicly traded companies disclose to investors what the commission describes as “climate-related risks” that could affect operations. If adopted, the SEC rules also would require companies to disclose greenhouse gas emissions.

The SEC announced the proposed rules in March and a comment period ended Nov. 1, but the agency isn’t expected to finalize the new requirements until next year.

Bloomberg, who ran for president in 2020 as a Democrat, is currently the United Nations’ special envoy on climate ambition and solutions. He is also chairman of the Task Force for Climate-Related Financial Disclosures, or TCFD, a panel that figures prominently in the SEC rules.

In fact, a Daily Signal analysis of the rules shows that it includes 243 references in which the Securities and Exchange Commission points to the Bloomberg-run climate task force as the source of inspiration.

On page 34 of the rules, for instance, the SEC says:

Our proposed climate-related disclosure framework is modeled in part on the TCFD’s recommendations. A goal of the proposed rules is to elicit climate-related disclosures that are consistent, comparable, and reliable while also attempting to limit the compliance burden associated with these disclosures.

Bloomberg is the founder of Bloomberg LP, a financial, software, data, and media company headquartered in New York City. He also is the founder of Bloomberg Philanthropies.

Potential New Revenue

Bloomberg LP appears well positioned to create new revenue streams for itself if subscriptions to a product called Bloomberg Terminal become the preferred source for SEC compliance.

An Investopedia analysis of Bloomberg LP estimates that it draws about $10 billion a year in revenue, primarily through a Professional Services division that includes Bloomberg Terminal, a computer system that enables investors to access global data. Bloomberg charges an annual subscription fee of about $28,000.

In his capacity as U.N. climate envoy, Bloomberg is committed to achieving “net-zero” greenhouse gas emissions in step with the goals of the Paris Agreement, the international climate treaty first adopted during a 2015 U.N. conference in Paris.

The Financial Stability Board, an initiative of the G-20 nations, established the climate task force during that U.N. conference and named Bloomberg as chairman. In June 2017, the task force issued its final recommendations, which serve as the basis for U.N. “pilot projects” involving banks, investors, and insurers.

Since then, Bloomberg has remained an active player in U.N. climate conferences and in Democratic Party politics in America.

Bloomberg served as a Republican—or with the endorsement of the Republican Party—during his time as New York’s mayor from 2002 through 2013. He had been a Democrat before that, however, and ran for president as a Democrat in 2020. Bloomberg was the single biggest donor to Democrats in that election cycle, campaign finance records show.

In September, the businessman turned political activist announced “a 45-day-long series of initiatives and commitments” designed to deliver “urgent climate action” in anticipation of the most recent U.N. climate conference, held from Nov. 6 to 18 in Sharm El-Sheikh, Egypt.

“Bloomberg created the Task Force for Climate [-Related] Financial Disclosure for the purpose of bringing the United States into these regulatory arrangements where companies are required to disclose the relationship between their business activities, their emissions, and what kind of climate risks they might encounter,” Tammy Nemeth, an energy policy analyst based in the United Kingdom, told The Daily Signal in a Webex internet call.

Nemeth added:

This effort is really being driven in Europe where they are already embracing the Bloomberg task force. It’s part of a broader progressive movement. In the U.S., there’s some resistance to these kinds of efforts.

…

Unfortunately, there are already a fair number of U.S. companies that are using [the task force’s] standards and they are trying to coordinate their climate disclosure practices with the SEC.

Nemeth is host of “The Nemeth Report,” a podcast focusing on energy and geopolitical issues, and the author of a recent report on global financial disclosure standards affecting hydrocarbon companies in Canada.

Additional Leverage

What happens next with the recommendations from the Bloomberg climate task force, Nemeth said, depends in large part on the fate of the SEC’s proposed rules in the U.S.

She said Bloomberg gained additional leverage over financial institutions in the name of climate change during last year’s U.N. climate conference in Glasgow, Scotland. That was when Bloomberg became vice chairman of the Glasgow Financial Alliance for Net Zero, a coalition of more than 550 financial companies from over 50 countries, according to the alliance’s website.

A Bloomberg LP press release issued Nov. 2, 2021, described the alliance as a “private sector-led initiative” folded into the U.N.’s “race to zero campaign” that encourages businesses and cities to dramatically curtail carbon dioxide emissions. The release said of the Bloomberg-led task force:

Through Bloomberg’s stewardship of the TCFD, it is now the leading framework for climate-related financial reporting and has been embraced by the G-7 and G-20. More than 2,700 organizations representing over $25 trillion in market capitalization support the TCFD, and nine jurisdictions have announced they will incorporate the TCFD framework into their climate reporting requirements.

G-7 refers to the group of leading industrial nations that includes Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States. G-20 refers to a larger group of industrial and emerging-market nations.

Public policy analysts familiar with the Security and Exchange Commission’s proposed climate-related rules say they see significant conflicts of interest at work between the SEC and Bloomberg.

“Because the commission lacks relevant expertise, it is forced to rely on third parties to inform its reasons for additional regulation and selection of standards in the proposed rule,” Katie Tubb, an energy and environmental policy analyst for The Heritage Foundation, said in comments submitted to the SEC in June. (The Daily Signal is Heritage’s multimedia news organization.)

“In some cases, choices seem to be based on what appears to have won international ‘popularity contests’ of acceptance,” Tubb said of the SEC rules. “But reliance on third parties is deeply problematic. In many cases, these are not neutral entities but self-interested parties who stand to gain significant economic benefit from the proposed rule if finalized.”

Profit Motive?

On Nov. 18, 2021, Bloomberg LP announced it was working to become the “financial industry’s first port of call for ESG [environmental, social, and governance] information.”

Bloomberg’s company also introduced “climate transition scores” that provide oil and gas companies with “benchmarks” for measuring progress toward net zero emissions in comparison to those companies’ own targets.

“It’s a lot easier to believe in a problem when the proposed solutions make you richer,” economist David Kreutzer told The Daily Signal in an email. “It’s even easier when you are the one proposing the solutions.”

Kreutzer, formerly a senior research fellow at Heritage, is senior economist at the Institute for Energy Research, a Washington-based nonprofit that favors free-market energy policies.

The SEC’s proposal would require companies to disclose three different types of emissions:

Scope 1 emissions, which are direct greenhouse gas emissions owned or controlled by a particular company.
Scope 2 emissions, which are indirect greenhouse gas emissions resulting from the generation of electricity, steam, heat, or cooling purchased or otherwise acquired by a company.
Scope 3 emissions, which aren’t directly produced by a particular company and don’t result from the activities of any assets it owns or controls. Instead, they are the result of what occurs “upstream” and “downstream” of a company’s activities.

A year ago, the Bloomberg news release said the company estimated Scope 1 and 2 greenhouse gas emissions for more than 50,000 companies across the globe, based on 800 different data points for each.

Bloomberg has yet to incorporate Scope 3 into those estimates.

Economic Benefit

In her June comments, Heritage’s Tubb cited research finding “there are questionable and concerning connections between Michael Bloomberg’s current position as … U.N. special envoy for climate ambition and global ambassador for [the] Race to Zero Campaign, Bloomberg LP’s role in developing the TCFD framework, and how this particular company would stand to benefit economically from the SEC’s choice in climate disclosure frameworks.”

The Daily Signal sought comment from Bloomberg LP’s media office, asking whether the company had any concerns about potential conflicts of interest over the SEC’s proposed rules.

The Daily Signal also invited the company to comment on potential legal challenges to the SEC proposal. The company had not responded by publication time.

Mary Schapiro, chairperson of the Securities and Exchange Commission under President Barack Obama and head of the secretariat for Bloomberg’s climate task force, discussed the importance of including the private sector in efforts to decarbonize the world economy when she was appointed by Bloomberg in November 2021 as vice chair of the Glasgow Financial Alliance for Net Zero, or GFANZ. Shapiro is also vice chair for global public policy of Bloomberg L.P.

“Disclosure is at the heart of reaching net zero, and the TCFD has provided a solid foundation to support the private sector’s net zero commitments through transparency and accountability,” Schapiro said of the climate task force in Bloomberg’s press release Nov. 2, 2021. “GFANZ complements this effort by solidifying a road map for accelerating the private sector on the path to net zero. I look forward to driving forward this ambitious initiative.”

In the runup to the U.N. climate conference in Egypt that concluded Nov. 20, Bloomberg Philanthropies announced 92 climate actions taken by Bloomberg LP and Bloomberg Philanthropies. These included various plans “to accelerate clean energy transition,” meaning the transition from using fossil fuels such as coal and oil to using “renewable” sources such as wind and solar.

Once the SEC’s proposed rules are finalized, they likely will attract litigation, according to news reports. Elected officials and legal scholars argue that the U.S. agency lacks the authority to compel public companies to disclose financial risks associated with climate.

David Burton, a senior fellow at The Heritage Foundation who focuses on tax policy, security law, and financial privacy, warned in comments to the SEC in June 2021 that climate disclosure requirements could “result in the creation of a new compliance ecosystem and pro-complexity lobby composed of the economists, accountants, attorneys, and compliance officers.”

The rule changes, Burton said, could “exacerbate the decline in the number of public companies and the trend of companies going public later in their life cycle.” Consequently, “ordinary investors” would miss out on the opportunity to invest in profitable companies, he added.

Another Key Player

How much does Bloomberg stand to gain from the new SEC rules if they survive legal challenges?

Even if the Securities and Exchange Commission is forced to backtrack on its final rules in response to legal challenges, Nemeth, the U.K. energy policy analyst, said she expects U.S. companies doing business in international markets to encounter burdensome regulations on climate disclosure.

Nemeth identifies an entity called the International Sustainability Standards Board, or ISSB, as another key player working to advance the recommendations of Bloomberg’s climate task force.

A London-based nonprofit called the International Financial Reporting Standards Foundation, which since 2000 has developed global disclosure standards for financial statements, established the board as a sister organization during the U.N.’s Glasgow meeting last year. The board says its mission is to bring standardized, sustainability-related financial disclosure requirements to the world.

The International Sustainability Standards Board already has embraced the recommendations of the Bloomberg task force, Nemeth laments.

Moreover, during the G-7 meeting last year in Cornwall, England, all seven member countries—including the U.S. and the European Union—agreed to mandate climate-related financial disclosures in alignment with the recommendations of the Bloomberg climate task force.

The task force framework already is mandatory for companies of certain sizes in some countries and jurisdictions, including the United Kingdom, New Zealand, Canada, Hong Kong, and Switzerland. The EU is poised to act on its own version of climate disclosure rules. The first draft of a legislative proposal for a Corporate Sustainability Reporting Directive has been filed with the European Commission, which is the executive arm of the EU.

SEC Readiness

Even if the SEC rules are derailed or delayed in some way by legal action in the U.S., Nemeth said, she anticipates that companies doing business in European countries where climate disclosure rules have been adopted will be required to comply with those rules.

“One could say [the rules] aren’t going anywhere, but rather are being foundational and incorporated into these other standards,” Nemeth told The Daily Signal in an email, adding:

Regardless of what happens with the SEC, any company that deals with banks, insurers, or investors in countries or jurisdictions adopting the new standard will have to comply with the new financial accounting rules.

Unfortunately, the [Bloomberg task force] recommendations aren’t going anywhere unless individual U.S states declare they are not to be used, since they are designed particularly to choke financing of hydrocarbons and any industry deemed not in alignment with the so-called ‘green transition.’

Kreutzer, the economic policy analyst with the Institute for Energy Research, said he views the Securities and Exchange Commission as ill-equipped to assess potential fallout to investors from climate-related regulations:

The SEC pretends it has the ability to identify investment risks and that climate risks are especially worthy of costly regulation. This past year blew that notion out of the water. The energy reductions brought on by Russia’s invasion of Ukraine, which pale in comparison to those needed to meet existing climate agreements, boosted the values of traditional energy companies at the same time that the valuations of many ESG-compliant companies have tanked.

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The post Bloomberg Could Benefit from Climate Rules He Helped Craft appeared first on The Daily Signal.

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